Health plans are devising ways to function even when their providers are being overrun and the insurers themselves face a vastly depleted workforce

Ed Silverman

To cope with the possibility of an avian flu pandemic, Blue Cross Blue Shield of Minnesota expects many of its 2.7 million members to seek health care out of the usual network of doctors and hospitals. In Seattle, Group Health Cooperative is working on what it calls telephone triage — providing cell phones to many employees in the belief that call volumes may skyrocket at the same time that various facilities are out of commission or people can't get to work. And in California, Kaiser Permanente invested in extra Tamiflu and, mindful of how all health systems ran out of N95 respirators during the SARS scare two years ago, has also ordered extra N95 masks.

Different approaches

Not all managed care groups are taking exactly the same steps. Some health plans, for instance, are so far declining to invest in face masks because there is some controversy over their effectiveness.

But all agree that preparing for a pandemic is weighing heavily on every organization. The shock and disruption caused by 9/11 and, more recently, Hurricane Katrina, may have served as test runs, of a sort, for managed care executives.

Huge calamity

Yet those calamities may be dwarfed by the worst-case scenario predicted for an avian flu pandemic, which some say has the potential to resemble the epic proportions of the Spanish Flu of 1918, when 20 million or more died worldwide.

"We're looking at an avian flu pandemic as part of a new class of threats," says Kenneth Alwin, business continuity principal at Blue Cross Blue Shield of Minnesota. "This won't be a snow day. This will be a paradigm shift."

Of course, that point may not occur. But the recent news about a growing number of infected family clusters in parts of Asia, which raises fresh concern about human-to-human transmission, is creating a greater sense of urgency.

The World Health Organization on June 20 reported 228 documented cases and 130 deaths. The agency has classified the threat at Level 3 — limited human transmission.

Meanwhile, the U.S. Department of Health and Human Services released some very sobering estimates.

The attack rate will probably reach 30 percent or more in the overall population, with illness rates highest, about 40 percent, among school-age children.

Of those who become ill, half will seek outpatient care. If a pandemic is severe, absenteeism may reach 40 percent during the peak stretch of an outbreak, estimated to last between six and eight weeks in an affected community.

Overall, a moderate pandemic would result in 90 million taking sick, 865,000 landing in hospitals, and 209,000 deaths.

By contrast, a severe outbreak would cause the same number of illnesses, but 9.9 million would wind up in a hospital and about 1.9 million people would die.

So far, the mortality rate has topped 50 percent.

"This is the challenge for health plans which, I think, will be overwhelmed," says Jeff Levi, executive director of Trust for America's Health, a non-profit health advocacy group. "They need to think of ongoing continuity of operations, because they won't be immune."

Daniel Aloi understands. As head of business continuity planning services for Aetna, Aloi is grappling with scenarios in which the big insurer expects so many staffers to be out of commission, or worse, that contingency service sites are being planned.

"We're looking at everything," says Aloi. "The core functions, such as customer service, claims processing, patient management. And there's critical work, such as dealing with enrollment and receivables."

The problem facing health plans is how to conduct business when it isn't business as usual. As Levi notes, if a big chunk of a community is affected by a flu outbreak, it stands to reason that a similar proportion of employees will also be affected.

By the same token, health care providers — from doctors in private practices to nurses and physician assistants in hospitals — will probably experience the same absentee and attrition rates as the general population. This means that health plans must work with those providers to ensure that they are taking the necessary precautions.

Another issue is the extent to which health plans will be in a position to accommodate the uninsured, a consideration that may pose ethical dilemmas and will require coordination with government agencies.

In such a situation, doctors and hospitals will be encouraged to serve the uninsured, which could strain the system overseen by health plans.

Diversify risk

Aloi believes that for a health plan to function during an outbreak, one way is to diversify the risk geographically. This step would include redistributing the workload, and possibly parts of the workforce, to sites in other regions of the country.

Other coping mechanisms include telecommuting for employees who must care for a sick family member; relaxing the usual rules for prescription drug refills; paying claims for members who are, temporarily, unable to pay premiums; automatically precertifying certain procedures; and offering vaccinations to the staff — a new infection control policy instituted by the JCAHO.

"Some of this is a work in progress," says Aloi. "We did a major simulation of a flu pandemic earlier this year at a major service center in Connecticut, but we still have to upgrade our plans."

Threshold effects

Rather than plan for specific numbers — a tempting exercise for anyone involved in contingency planning — David Grossman, MD, MPH, medical director for preventive care, says his Group Health Cooperative plan is trying to gauge what he calls "threshold effects."

The first threshold, in his view, is preparing for changing flows within the organization, such as call volume, patient volume, and absenteeism. To a limited extent, this may resemble planning for a natural disaster or even a protracted labor strike.

The next threshold takes on larger dimensions, though, because it involves community flows, such as a regional activation plan that requires collaboration with government agencies and public utilities.

"Actually, we're looking at this as an opportunity to plan for more than just a pandemic," says Grossman. "We're using this as a platform to prepare for various other kinds of emergencies."

As Ken Alwin of Blue Cross Blue Shield of Minnesota makes clear, everyone is in this together. Yet even a comparatively healthy health plan can be sidetracked if suppliers or utilities are incapacitated.

This interdependency, however, adds a layer of planning that makes the threat of an avian flu pandemic unprecedented. This is likely further complicated by the notion that a pandemic may occur in waves, each lasting two to three months, rather than one bout that comes and goes quickly.

War games

"At some point, it could be like 1918," says Skip Skivington, interim vice president for supply chain and national crisis manager for Kaiser Permanente. "But how can we realistically plan for something as overwhelming as that event was to the entire health care delivery system?"

As he sees it, planning for an avian flu pandemic requires one to envision the most likely epidemiological curve. So Kaiser Permanente is taking a running-start approach to planning. At some point, the worst-case scenario may resemble a bioterror attack, so Skivington is doing war-game modeling.

One crucial aspect is planning for employees. Kaiser and other health plans must provide enough vaccines and other medications for staffers and their families to ensure that services can be delivered to the sick.

But one of his larger concerns is the supply chain — will suppliers be in a position to get necessary vaccines, medications, devices, and other items to hospitals, clinics or whatever facilities are functioning as health care centers? And if not, what then?

"It's already a complicated payer system, and a pandemic would make it even more complicated," says Skivington. "But if the medical infrastructure fails, it would have a disastrous effect on the nation.

"There's another aspect to this, though. With the flattening of the global-supply chain, a lot of medical products are physically made in Asia. But if that's ground zero of a pandemic, will those products even be shipped? That's why the whole complicated supply chain keeps me up at night."

More Tamiflu

As a result, Kaiser Permanente has increased its supply of Tamiflu, for instance, as well as face masks.

Kaiser is an example of a health plan willing to dig deeply into its budget to prepare, but that does not mean a financial impact won't be felt. What happens to managed care budgets if a pandemic strikes?

One health plan with more than 600,000 members told the trade group America's Health Insurance Plans that a mild pandemic could cost that insurer $24 million and that a severe one might cost $330 million.

Short of an infrastructure collapse, however, some health plan executives believe that they can tough it out. They may have no choice. Cutting into surpluses or buying reinsurance policies may not be feasible, some executives say.

"Reserve levels are something we've taken a very close look at," says BCBS Minnesota's Alwin. "But a pandemic risk isn't something you can automatically raise your premiums for. It's an isolated occurrence. And I think it's unlikely that, for example, premium receipts would drop to zero and never come back. Hopefully, one's reserve levels provide enough flexibility to sustain a plan so the plan can continue serving its members through an outbreak."

For instance, Blue Cross Blue Shield of North Carolina, which has 3.3 million members, currently has 3.8 months of claims and administrative expenses in reserves. That amounts to a safety net that should hold up, says spokesman Mark Stinneford, although he adds that, for now, it remains unclear how long the plan should pay claims for those who are unable to pay premiums if a severe pandemic strikes.

Reinsurance

Nonetheless, managed care groups aren't rushing to buy reinsurance policies, although they can be had. Reinsurance is seen as more appropriate for life insurers than health insurers. A recent article in Business Insurance noted that, for the moment, such policies are pricey.

A recent report by Standard & Poor's credit analysts noted that health insurance claims are actually likely to drop during a pandemic because fewer procedures would take place. The risk of a fatal infection would probably outweigh the desire for laser eye surgery. This behavior played out after Hurricane Katrina, as an example. But there's another sad reality: If many people die, there's less strain on health care systems.

Overall, a pandemic is forecast to reduce health care demand by 4 percent if a moderate outbreak occurs, and by up to15 percent if a severe episode grips the nation, according to a recent report by AON Consulting.

Rainy day money

"The health plan sector is actually better capitalized than it has been for a very long time and this can get it through a period of losses," says Shellie Stoddard, a Standard & Poor's health insurance credit analyst. "Given the uncertainty of a pandemic occurring in the next several years, one could assert that government intervention is a greater threat."

Who's in trouble?

As she sees it, the uncertainty surrounding a health plan's ability to financially survive a pandemic is about the nuts and bolts of operations — staff members getting to office, phones being answered, claims being paid, doctors being in a position to care for patients.

However, Stoddard also makes an interesting observation. A large national organization may be less vulnerable, in some respects, than a health plan that is concentrated in one geographic region.

Let's say an outbreak occurs in Philadelphia and its suburbs. With a few million covered lives, Independence Blue Cross Blue Shield may feel the effects of a pandemic more so than a national health care plan, she says.

"Unfortunately, there's no logical cap to the number of illnesses that could result in death," says Stoddard, "but there's a clear cap on the health plan exposure in terms of the number of people cared for by providers or facilities."

Indeed, the numbers are potentially staggering, even if the morbidity rate is predicted to remain below 2 percent of the overall population. And 1918 was a long time ago — no one in health care today has experienced anything of that magnitude.

New experience

"This is going to be a huge burden," says Levi of Trust for America's Health. "It will push out the ability of health plans to do routine care and monitoring for other conditions. It's really going to be a new experience."